Shree Om Metals Private Limited Through Its Director Cum Authorized Signatory Ramesh Kumar Agarwal vs. Union Of INDIA Through The Chief Commissioner Goods And Service Tax And Central Excise

Held

The Court held that the show cause notices and the Order-in-Original were based on mere presumptions and possibilities, with no concrete proof of unaccounted manufacturing of M.S. Ingots and clandestine removal thereof. The Court found that the electricity consumption pattern relied upon by the respondents was arbitrary. It noted the wide variation in electricity consumption reports from different credible sources, including Dr. N.K. Batra's report, the Joint Plant Committee, NISST, and the All India Induction Furnace Association. The Court emphasized that without conducting an experiment at the petitioner's premises to determine the actual electricity consumption pattern for manufacturing M.S. Ingots, relying on any single report would be arbitrary and a violation of Article 14 of the Constitution. The Court quashed and set aside the Order-in-Original and remanded the matter back to the Assistant Commissioner for fresh adjudication. The adjudicating authority was directed to conduct an experiment at the petitioner's premises to ascertain the electricity consumption pattern and consider other relevant evidence. The Court explicitly stated it was not going into further details of arbitrariness in the Order-in-Original.

Facts

The petitioner, Shree Om Metals Private Ltd., is challenging show cause notices dated November 23, 2016, and June 22, 2017, issued by the Assistant Commissioner, GST & CX, Division-IV, Jamshedpur, for periods October 2015 to March 2016 and April 2016 to March 2017, respectively. These notices alleged clandestine removal of M.S. Ingots. The petitioner filed a reply, after which an Order-in-Original was passed by the same authority on November 22, 2017/December 1, 2017. The petitioner contends that these actions were based on presumptions and surmises, particularly regarding electricity consumption patterns, and that the revenue failed to prove clandestine removal. The amount in dispute is not explicitly stated.

Key Issues

1. Whether the show cause notices and the Order-in-Original, which are based on presumptions and surmises regarding the consumption of electricity, are legally sustainable, particularly concerning the alleged clandestine removal of M.S. Ingots? (Section 73 of CGST Act, 2017, or equivalent under previous law, and principles of evidence). Petitioner's Arguments: The petitioner argued that the entire case against them rests on presumptions and surmises, with no concrete proof of unaccounted manufacturing or clandestine removal. They contended that the electricity consumption patterns cited by the revenue are baseless and inconsistent with reports from credible institutions like the Joint Plant Committee, Ministry of Steel, Government of India, and other cited precedents such as R.A. Castings (Private) Ltd. vs. CCE. The petitioner emphasized that the burden of proof lies with the revenue, which has not been discharged. They also argued that the revenue's surprise at the petitioner's losses is irrelevant to proving clandestine removal. The petitioner relied on various High Court decisions and Orders-in-Original where similar grounds were dropped. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue. However, it is implied that the revenue relied on Dr. N.K. Batra's report and electricity consumption patterns to allege clandestine removal.